House leader proposes $2.4 billion business break

AUSTIN — Texas businesses would get a tax break of about $2.4 billion, including a 25-percent across-the-board rate cut, under a top state House leader’s proposal that differs sharply from the Senate’s tax-relief plan.

Express Newsletters

Get the latest news, sports and food features sent directly to your inbox.

The business-tax cut would be in addition to a sales tax reduction in a package that will total $4.8 billion to $4.9 billion, said House Ways and Means Committee Chairman Dennis Bonnen, R-Angleton, in a Friday interview.

The emerging details confirm consistent comments from Bonnen that the House would take a different path than the Senate on tax relief, one of the top issues of this legislative session. He had previously sketched out its broad parameters and said he plans to release the full plan next week.

“The franchise tax is very onerous on businesses, and cutting one quarter of that tax for every taxpayer across the board is a great way to start eliminating that tax,” said Bonnen, whose proposal was warmly received by representatives of business and two major conservative groups.

Senators under Lt. Gov. Dan Patrick have approved an approximately $4.4 billion package over the next two years that targets school property tax bills along with business tax cuts.

The Senate package would increase the homestead exemption by changing the way it’s calculated, tying it to 25 percent of the state’s median market value rather than the current fixed-dollar figure. It also would handle the business tax cut differently than proposed by Bonnen, decreasing the rate by 15 percent plus exempting more small businesses from paying the levy.

The three bills in the Senate package have individual price tags that together total $4.6 billion. But if both business tax-cut measures pass, their combined impact is about $177 million less than the sum of their stand-along fiscal notes, according to the state comptroller’s office.

That’s because smaller businesses that would otherwise benefit from rate reduction — and whose reduced taxes are part of the estimate for that bill — would no longer be liable for taxes at all if it passes. The same businesses still would benefit, but they can’t be counted twice.

Sen. Charles Schwertner, a Georgetown Republican who is proposing to exempt more small businesses, said he likes his own idea but thinks senators “absolutely” are willing to negotiate.

“I’m glad that people are talking about diminishing the effects of one of the most unloved taxes in Texas. From my own personal point of view, I think it would be, if we have limited resources, important to eliminate the tax for 52 percent of those that pay it,” he said, adding that he thinks his bill raising the revenue exemption from $1 million to $4 million “has a greater job growth and economic multiplier effect. But I welcome the discussion.”

Patrick and Senate Finance Committee Chair Jane Nelson, a Flower Mound Republican who is author of the two other bills in the tax package, didn’t immediately respond to a request for comment.

The differing plans set up a conflict between the chambers.

Big business groups have objected to elements of the Senate plan, saying an escalating homestead exemption would shift more of the tax burden to businesses. Those groups also said exempting more businesses would create a taxpayer divide, leaving relatively few paying the levy.

Patrick has long called for cutting property taxes, saying last month that he and Gov. Greg Abbott have said that “lasting franchise and property tax relief are a critical component of a successful session.”

Abbott has said he’ll reject a state budget that doesn’t include business-tax relief. When Bonnen lofted the sales-tax idea last month, Abbott spokeswoman Amelia Chassé said the governor “looks forward to working with the Legislature to ensure tax relief is achieved.”

Dale Craymer of the business-based Texas Taxpayers and Research Association, one of the groups that objected to elements of the Senate tax-relief plan, said Bonnen’s proposal “provides broad relief without picking winners and losers.”

Will Newton of the National Federation of Independent Business/Texas, which has supported the Senate package, said Bonnen’s proposed 25 percent reduction in the tax rate is “a marvelous thing. …Franchise tax cuts, however they come, are wonderful.”

Talmadge Heflin of the Texas Public Policy Foundation, which would like to do away with the business tax, said of Bonnen’s proposal, “We like that as a start.” He also looked warmly on the Senate proposal.

Dick Lavine of the Center for Public Policy Priorities, which focuses on services important to middle- and lower-income Texans, cited the need to address long-neglected services, pointing out that business groups have made the same point.

“We agree with a lot of the big business groups that the first thing to do is catch up with our neglect of our highways and our public education and health and human services,” Lavine said.